Joe Tareen's Posts - DealerELITE.net2024-03-29T12:09:27ZJoe Tareenhttps://www.dealerelite.net/profile/JoeTareenhttps://storage.ning.com/topology/rest/1.0/file/get/2535846895?profile=RESIZE_48X48&width=48&height=48&crop=1%3A1https://www.dealerelite.net/profiles/blog/feed?user=397k6rwh8lt2z&xn_auth=no5 Ways to Recession-Proof Your Dealership.tag:www.dealerelite.net,2019-11-13:5283893:BlogPost:7560432019-11-13T13:00:00.000ZJoe Tareenhttps://www.dealerelite.net/profile/JoeTareen
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<p>Are you in-charge of running a new car dealership and starting to see the signs of slowing car sales? You are not alone. The national news agencies, the Federal Reserve, and industry analysts all agree. The slow down is coming and with it brings immutable changes to the auto industry.</p>
<p>Here is what Forbes is saying referrencing a…</p>
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<p>Are you in-charge of running a new car dealership and starting to see the signs of slowing car sales? You are not alone. The national news agencies, the Federal Reserve, and industry analysts all agree. The slow down is coming and with it brings immutable changes to the auto industry.</p>
<p>Here is what Forbes is saying referrencing a Bloomberg report regarding the coming economic recession in the US:</p>
<p>"United States Recession Probability Forecast, which shows the median probability (of a US recession) in the 35% range as of this writing..."<span> </span><a href="https://www.forbes.com/sites/advisor-intelligence/2019/09/24/recession-what-are-the-odds/#1fc27e167764" target="_blank" rel="nofollow noopener">https://www.forbes.com/sites/advisor-intelligence/2019/09/24/recession-what-are-the-odds/#1fc27e167764</a></p>
<p>Here is another revealing article from Bloomberg directly, predicting the coming collapse of US auto sales figures:<a href="https://www.bloomberg.com/news/articles/2019-10-01/toyota-typifies-ugly-month-with-16-slide-auto-sales-update" target="_blank" rel="nofollow noopener">https://www.bloomberg.com/news/articles/2019-10-01/toyota-typifies-ugly-month-with-16-slide-auto-sales-update</a></p>
<p>Here is the main takeaway: New car sales are declining and that is not occuring in isolation. Truth of the matter is; the US consumers' current buying patterns are weakening and we're due for a recession in the US soon. When it actually occurs, is anyone's guess, however it is near.</p>
<p>That being said, the-show-must-go-on. You're a smart dealer and you want to plan ahead for all contingencies. You want to win today but not at the expense of tommorrow. What's the best strategy to recession proof your dealership? On that later.</p>
<p>First: What are recessions?</p>
<p>Besides the technical definition of a decline in GDP in two successive quarters, recessions are economic baptisms: Old businesses die, new businesses are born. Old demands vanish and new demands appear. Old industry wither away, new industries take shape. Old companies become irrelevant and new companies are created. Here is short list of companies started during a recession:</p>
<ol>
<li>General Electric:1890</li>
<li>IBM: 1896</li>
<li>General Motors: 1908</li>
<li>Disney:1923</li>
<li>Burger King: 1953</li>
<li>Microsoft:1975</li>
<li>Apple: 2001</li>
</ol>
<p>Do you recognize any of them?Of course it is a rhetorical question!</p>
<p>The reality is; consumers just do not wake up one day and decide not to spend their money anymore. They simply reallocate their dollars to alternative products and services. It's all mental, in a sense economies are not static realities, they are physical manifestations of our collective conscious and unconscious believe systems.</p>
<p>So, we agree that recessions bring about a marked change in buying habits of consumers and the auto industry is certainly not immune to that change. This is precisely why as a general manager or a dealer principal, you must find ways to keep your dealership relevant and your customers engaged.</p>
<p>This means for example; when other dealerships are reducing marketing budgets and going conservative, a winning strategy might be to increase marketing budgets along with raising your customer service levels. This is the time to buck-the-trends and double-down on your efforts.</p>
<p>Here are five areas of focus to recession-proof your dealership:</p>
<ol>
<li><strong>The mindset change</strong>: First and foremost: You must as an organization adopt a recession-proof mindset and that mindset is your ability to change and the speed with which your team implements that change. Every single team member of your dealership must and will need to run plays from the same playbook. You're a leader and a leader is a "dealer of hope". Make decisions a quick enterprise. Do not allow the old mindset to force your organizition to recede back into the old ways. The most dangerous phrase in business: "We've always done it this way" will always be the easiest thing to revert back to. Do not let it slow down your ability to respond to new customer demands or create mental roadblocks in introducing new intitiatives. The best place to start is to gather as much customer feedback as possible. Ask your customers what do they want from you - simple. Obssesively read your CSI survey results and online reviews. What do they reveal about your organization and better yet the mindset of your customer base?</li>
<li><strong>Double down on your ad spend</strong>. Market more aggresively not less, but make marketing an investment not an expense. Hold third-party vendors to the fire if they make a claim. "Retail is detail" and if you have never been a detail oriented person, its time to change and evolve.</li>
<li><strong>Solve a problem that gets worse with recession</strong>: When customer are not buying cars they are servicing them more. Is your Service department ready for the increased traffic on the drive? More calls, more appointments, and more repair orders. However, same capacity, will result in less attentive staff, delays in work completion times, unhappy customers, bad surveys and reviews will eventually lead to a decline of profits. Be obsessed with how your customers experience your brand. Invest in drastically improving the quality of every customer touchpoint. In every crisis there is an opportunity. Tactically, it is time to streamline your organzation's decision making process. Learn to run lean so you can run fast.</li>
<li><strong>Competition proof your dealership</strong>: Do one thing your competition is scared off their socks to do. Perhaps it is time to take your Service concierge program to the next level and implement a technology solution which facilitates an efficient customer vehicle and drop off operation. How will this affect your market penetration inside your own Primary Marketing Area (PMA)? There are a few third-party vendors out there with solutions which are being utlilized by a healthy dealer base. Always ask for references before signing up with any vendor and make sure the added expenses do not negatively affect your balance sheet. A positive return-on-investment is a must.</li>
<li><strong>Unlock the hidden profits in your DMS data</strong>: Equity-buy-back programs only work when you fully work them. There is no better place to start with those then your Service drive. Where else are you going to get so many daily cutomer touchpoints? The customer is there and so is their trade. It is a captive audience. However there is a particular way you must execute the Service equity program to get the daily wins. Here is the best and the most proven way to do it: Split up the efforts in three separate areas. 1)<span> </span><strong><em>The Technology<span> </span></em></strong>- look for solutions which track real-time open repair orders and provide you beyond just the equity on the vehicle in Service. You will need more detailed open loan information such as monthly payments, current interest rate, term of the loan and principal to personalize each transaction to customers' needs. 2)<span> </span><strong><em>The Strategy</em></strong><span> </span>- Setup real-time alerts for open repair orders and have your Sales BDC call customers who are still at your dealership and enroll in a vehicle-buy-back program. Once you get a verbal "yes" from your customers on-site, then it becomes substantially easier for your sales associate to approach them. 3)<span> </span><strong><em>The Approach</em></strong><span> </span>-The best way to close Service equity leads, is to not treat them as traditional sales transactions, because they are NOT. Customer did not show up at your dealership through the front door, rather through the Service drive. Provide them options and craft offers "they can't refuse". Be decisive and do not be greedy. If they have a strong FICO score, positive equity in their trade, and are willing to talk, there is a strong probability, that it is a<span> </span><u>deal</u>.</li>
</ol>
<p>A complete automotive sales collapse may be a thing of fantasy. However some stores are barely hanging on to a profit thread and surviving only through OEM incentive programs. Do the internal financial math and come up with a figure in terms of percentage decline in over-all sales which might put your organization in a severe financial bind. Then go as a team and craft new products and services to deliver to your customers, so you can mitigate for those revenue losses. Be PROACTIVE. BE INNOVATIVE.</p>The Impending Tsunami of Customer Defections from New Car Dealers and the Role of the Internet.tag:www.dealerelite.net,2011-06-22:5283893:BlogPost:1381032011-06-22T00:00:00.000ZJoe Tareenhttps://www.dealerelite.net/profile/JoeTareen
<p>Many new car dealers know that something is not right with their service departments or for that matter with their dealership business model as a whole. Customer loss rates are at all time high, "Right To Repair" legislation is seemingly hanging over like a "sword of Damocles" and profits margins are shrinking across the board. I bet in almost every franchised new car dealership, management meetings are being held to discuss how to tackle these challenges and I can imagine the nature of some…</p>
<p>Many new car dealers know that something is not right with their service departments or for that matter with their dealership business model as a whole. Customer loss rates are at all time high, "Right To Repair" legislation is seemingly hanging over like a "sword of Damocles" and profits margins are shrinking across the board. I bet in almost every franchised new car dealership, management meetings are being held to discuss how to tackle these challenges and I can imagine the nature of some of these conversations. Some advocating for increased marketing budgets, some for increased employee count and some for adopting the newest kid on the block CRM tool that brings with it the promise land of unending revenues and skyrocketing profit margins, only to end up as just another under utilized CRM contract. According to the latest NADA annual report for 2010, in 2009 "nations' franchised new car dealers sold just 10.4 million new light vehicles in 2009, as the recession deepened in the first half of the year. Sales were down dramatically from the previous year's 13.2 million units." Things were not substantially better in 2010 and yet again in 2011 the signs of a strong revival are not clear.</p>
<p>On the other hand the Aftermarket or the Independent service centers continue to have record years. Here's an interesting quote from Lang Marketing, a leading automotive Aftermarket research authority: "The Car and Light truck Service (DIFM) Market will increase more than $10 billion at user-price between 2009 and 2012, as Service Market product use expands its light vehicle aftermarket share." It also notes that "..vehicle Dealers will suffer the largest Service Market product loss between 2009 and 2012, an estimated $0.6 billion at user-price. Auto Parts Stores with bays and the residual category of Other Service Outlets will not contribute to Service Market product growth over this three-year span." If these reports and statistics do not alarm the franchised new car dealers, I don't know what would. So really, we know what the challenges are: Revenue losses are increasing and customer loyalty is decreasing: Bottom line.</p>
<p>So what really is going on? I believe that a "Longtail" effect is taking place. The internet is in the process of doing to Service what it did to Sales. It is simply starting to arm the consumer with unbelievable breadth of information as well as multitudes of price options, locally! if you disagree with my assessment just watch the latest Meineke commercial and you will come to know. Meineke has figured out that giving consumers different options in prices is the most effective way not just to market but also to increase revenues. As the internet continues to make its transition from a knowledge based utility to its logical end of a monetary transaction facilitator, a localization effect is taking place. Consumers are increasingly connected not just globally but also locally. They are increasingly aware of what is a fair price to pay for auto service and repairs and what it should include. The Aftermarket segment is aware of this and is constantly using price promotions and hefty discounts to generate traffic into their stores and then focus on ancillary revenue opportunities. On the other hand the franchised new car dealers largely continue to believe that spending money on direct mail campaigns, making BDC calls and posting coupon on their website is the most effective way to bring customers back into the dealership. In my opinion this lack of a targeted promotional campaign strategy that should price promotional items for each car owner based on his or her buying habit or demographic will no longer yield fruitful results. While at the same time many of consumers continue to hold a belief that business costs of new car dealers are just too large to ever offer a reasonable pricing structure for their needs in comparison to let's a Joe's Garage down the road. I believe this perception is correct because it is inherently held by the dealers themselves. Isn't this the reason a service charge at a franchised New car dealer is higher in the first place?</p>
<p>Due to the lack of smart internal process driven tools, dealers are not in the place to turn their large facilities and higher employee counts into an advantage. Their processes are too slow-moving and there is too much red tape and as a result it is gobbling up a large chunk of dealership resources without any immediate monetary benefits. Now I know new car dealers can argue all day along about the value of their amenities and etc, but if the US economy continues the downward trajectory, consumers' number one priority will always be price, excellent service will be a pre-requisite not an option for every service center regardless of whether they belong to the franchised new car dealer segment or the Aftermarket or Independent. Online reputation mechanisms are not as forgiving as a past bad experience that only stay in a car owner's head. Internet's effect on the retail auto industry is fascinating. At one hand its highly effective on the other highly unforgiving. It's a beast that needs taming otherwise many will not survive its wrath.</p>
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<div><span><br/></span></div>An end-to-end multi-solution Service platform: Request for Industry commentstag:www.dealerelite.net,2011-02-10:5283893:BlogPost:550832011-02-10T17:00:00.000ZJoe Tareenhttps://www.dealerelite.net/profile/JoeTareen
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<p><b>The Pain</b></p>
<p><b> </b></p>
<p><b>Nation wide, OEM franchised service centers continue to loose hundreds of thousands of dollars worth of revenue everyday. Some service centers may be letting go as much revenue as they are generating, without even realizing the enormity of the loss.</b></p>
<p><b> </b></p>
<p><b>Through our market research and with a substantial number of Repair Order Revenue Gap…</b></p>
<p><b> </b></p>
<p><b> </b><b> </b></p>
<p><b>The Pain</b></p>
<p><b> </b></p>
<p><b>Nation wide, OEM franchised service centers continue to loose hundreds of thousands of dollars worth of revenue everyday. Some service centers may be letting go as much revenue as they are generating, without even realizing the enormity of the loss.</b></p>
<p><b> </b></p>
<p><b>Through our market research and with a substantial number of Repair Order Revenue Gap analyses carried out at local dealerships, a consistent picture has emerged. This picture is not pleasant and forebodes a very challenging and an uncertain future for all OEM franchised service centers. Especially when seen in comparison to what the competing “Aftermarket” industry has been able to achieve with the AAIA and Internet Parts Ordering (IPO) standards.</b></p>
<p><b>These challenges are not temporary; they are deeply mired in how the information technology has and continues to change the entire automotive landscape. Multiple online resources, accessible with a few clicks, have armed customers with real-time information. This is a game-changer!</b></p>
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<p><b>As mentioned earlier, in most cases OEM franchised service centers are not only relinquishing an equal amount of revenue as they are capturing, but their inability to quantify these losses in terms of dollars and cents is also puzzling and problematic. We have coined this phenomenon Customer Pay Black Hole. Customer Pay Black Hole’s existence is validated through a very fundamental question posed to every OEM franchised organization: how much of the potential customer pay business was actually <u>NOT</u> closed in your service center today?</b></p>
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<p><b>For the most part the answer will be “I don’t know’ but on the other hand it is not so surprising. How can anyone possibly answer this question when there is <u>no</u> mechanism in place to assign a revenue benchmark to every customer/vehicle that may enter into a service center? We all know that a Customer Pay Black Hole exists for all OEM franchised service centers. Do we know the exact size of this Black Hole for each service center? Hardly!</b></p>
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<p><b>Although the auto industry may speculate and hold a wide range of elements to be the contributing factors behind this Black Hole’s existence, in our expert view, this phenomenon occurs due to the following three fundamental reasons:</b></p>
<p><b> </b></p>
<ol>
<li><b>A complete lack of or proper implementation of business process accountability measures.</b></li>
<li><b>Inability to identify and understand customer demand opportunity and potential business capacity utilization.</b></li>
<li><b>Lack of an effective dynamic pricing strategy based on varied vehicle, econometric, and demographic differences.</b></li>
</ol>
<p><b> </b></p>
<p><b> </b></p>
<p><b> </b></p>
<p><b>Market Segmentation</b></p>
<p><b> </b></p>
<p><b>In the OEM franchised service center world, every customer whether driving a Ford Focus or an Eddie Bauer Expedition, is painted with the same pricing strategy brush. Lack of a deep insight into their own customer base forces these service centers to adopt a “one price fits all” formula. This in turn provides many customers with little or no incentive to continue a business relationship after their vehicles’ OEM warranties have expired.</b></p>
<p><b> </b></p>
<p><b>For the most part service menu item prices are not designed on the basis of consumer group dynamics, vehicle differentiations, previous buying habits etc. They are also not devised with the knowledge of which service items are ‘sensitive’ items and which ones ‘blind’. </b></p>
<p><b> </b></p>
<p><b>The customer base of a typical OEM franchised service center may contain customers from a wide variety of econometric or demographic background positions. However the maintenance packages, parts prices and labor rates offered to customers do not take any of the above factors into account, leading to several revenue opportunities not being better optimized. The concept of ‘Price Image’ is virtually foreign to this industry.</b></p>
<p><b> </b></p>
<p><b>Another challenge facing the OEM franchised service center is their inability to identify service bay or service stall hours of operations as perishable inventory units. For instance if a typical service center flags on average of 1.25 labor hours for every actual hour per service stall and the effective labor rate is $75 per hour. One can deduce that the actual revenue value for every hour of operation for a service stall is $93.75. If not billed this opportunity is lost forever. The Auto service industry as a whole must understand, as the Hotel and the Airline Industry has, in order to grow revenues and profits, they must have a strategy in place to minimize the number of perishable inventory losses. Every OEM franchised service centers’ ultimate goal should be to keep service stalls occupied at all times within the desired profit expectations. This can only be accomplished through an insightful and a real-time Revenue Management solution.</b></p>
<p><b> </b></p>
<p><b>To design such a solution of course is nearly impossible given the current levels of technological sophistication deployed in most OEM franchised service centers. A technological leap or a paradigm shift is required.</b></p>
<p><b> </b></p>
<p><b> </b></p>
<p><b>The Solution</b></p>
<p><b> </b></p>
<p><b>This paradigm shift is an immediate design and implementation of a technology solution that incorporates Revenue Management, Business Process Management and Customer Relations Management strategies under a one umbrella. Revenue Management solutions have been pioneered by the Hotel and the Airline industries and with great success. At the heart of this strategy lies a very fundamental question that every business with a substantial running expense should ask: how to price each offered item in order to maintain a constant stream of business without compromising profit margins?</b></p>
<p><b> </b></p>
<p><b>The answer lies with Revenue Management. We believe technological solutions, similar to the ones implemented in the Hotel and or the Airline industries can be effectively customized and delivered to the OEM franchised service centers via a seamless multi-solution auto service platform. This platform must be in essence an end-to-end platform, must incorporate all phases of a customer fulfillment and follow-up process, and must be scalable as well as dynamic.</b></p>
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<p><b>On the Revenue Management side, identifying for each service center their “Price Elasticity” figures should be the underlined objective for any solution to be effective here. “Price Elasticity” is</b> <b><i><u>defined as the percentage change in quantity demanded divided by the percentage change in price</u></i></b><b>. In other words, at which individual optimum price level a customer is most likely to choose your shop for each one of her car care needs. This on-demand analysis coupled with an effective customer communications strategy at every OEM franchised service center should help capture a substantial amount of the lost revenue opportunity. It is also referred to as “Price and Revenue Optimization”.</b></p>
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<p><b>However, the “Price Elasticity” or “Price and Revenue Optimization” concepts alone cannot achieve the level of total business optimization that is required to fulfill the value proposition. OEM franchised service centers are multidimensional structures in essence and ‘Value Add’ in one aspect of the business can lead to a ‘Value Loss’ in another. Therefore in order to achieve total business optimization, customized Business Process Management strategies must be a large part of any technology solution that portends to be the effective solution in overall scheme of things.</b></p>
<p><b> </b></p>
<p><b> The ability to effectively process a large number of customer fulfillment orders is a pre-requisite to a successful implementation of any “Revenue and Price Optimization” strategy. In other words before we begin to go after the lost or potential demand opportunity we must first establish effective internal processes and benchmarks to achieve high levels of ‘Stakeholders Satisfaction’ and increased productivity.</b></p>
<p><b> </b></p>NADA 2011tag:www.dealerelite.net,2011-02-07:5283893:BlogPost:535522011-02-07T21:37:36.000ZJoe Tareenhttps://www.dealerelite.net/profile/JoeTareen
My message of creating Revenue Management based software for Fixed Ops resonated well with some major players at the NADA. Never been so excited to be working on this project then I am now. Many dealers are not looking for bells and whistles they are looking for a solid end-to-end solution that not only improves their profits margins but also their internal operational processes. Isn't that the main objective of achieving total business optimization? Stay tuned for some great news and…
My message of creating Revenue Management based software for Fixed Ops resonated well with some major players at the NADA. Never been so excited to be working on this project then I am now. Many dealers are not looking for bells and whistles they are looking for a solid end-to-end solution that not only improves their profits margins but also their internal operational processes. Isn't that the main objective of achieving total business optimization? Stay tuned for some great news and in-depth analysis from my end regarding what I saw at the NADA.